BRASILIA, March 26 (Reuters) – Brazilian authorities on
Thursday said they uncovered a tax fraud scheme at the Finance
Ministry’s tax appeals board that may have cost taxpayers up to
19 billion reais ($5.96 billion).

The news came in the midst of a multibillion-dollar
corruption scandal at state oil company Petroleo Brasileiro SA,
or Petrobras, that has rattled Brazil’s political
establishment and weighed on the fragile economy.

In the latest case, federal police inspector Marlon Cajado
said companies bribed members of the CARF, a body within the
Finance Ministry that hears appeals on tax disputes, to get
favorable rulings that reduced or waived the amounts owed.

Police said they were investigating 70 companies, which were
not named. Members of the tax appeals body, as well as tax
consultants and lawyers suspected of acting as intermediaries in
receiving bribes, are also being probed.

So far, investigators have detected suspect decisions that
cost the state 5 billion reais in tax evasion and are probing
other cases that could raise the total to 19 billion reais,
Brazil’s tax agency said in a statement.

The cases under investigation came before the board between
2005 and 2013, well before current Finance Minister Joaquim Levy
took office.

While Levy will not be held responsible, the tax fraud case
could worsen the political climate at a time when the popularity
of President Dilma Rousseff’s government has plummeted due to
the Petrobras scandal and a stagnant economy.

“It further clouds the atmosphere,” said a finance ministry
official who requested anonymity due to the sensitivity of the
matter. “Our only alternative is to crack down on corruption.”

Early on Thursday, police raided the offices of the tax
appeals board in Brasilia, and the homes and offices of tax
consultants and lawyers accused of involvement in the fraud
scheme in Brasilia and the states of Sao Paulo and Ceara.

They seized documents and 1.3 million reais in cash, but no
arrests occurred, Cajado said at a news conference.

He said industrial, agribusiness and civil engineering
companies and banks paid bribes of up to 10 percent to
“manipulate” rulings in disputes over cases that involved
between 1 and 3 billion reais in taxes due.

The suspects face charges of influence peddling, corruption,
criminal conspiracy and money-laundering, which carry prison
sentences of up to 50 years. Companies accused of paying to
obtain favorable rulings will have their cases reopened.

BRASILIA (Reuters) – President Dilma Rousseff’s government denied on Wednesday that it is looking to strike a “grand bargain” with Brazilian construction and engineering firms implicated in the kickback scandal at state-run oil company Petrobras.

With Brazil facing recession, the government is keen to limit economic fallout by reaching leniency deals with some of the 24 companies under investigation that have halted projects and laid off workers after Petrobras stopped paying them.

Reuters reported last month that some of those companies, which include the country’s top builders, were pressing the government and judiciary to strike a “grand bargain” to minimize the legal fallout.

But prosecutors say such leniency deals will hinder criminal investigations to punish corrupt executives who allegedly paid billions of dollars in bribes siphoned off overpriced contracts with Petroleo Brasileiro SA, as the oil company is formally called.

“There is no such big agreement,” Brazil’s solicitor general Luís Inácio Adams said at a congressional hearing.

Brazil’s comptroller general Valdir Simão said four of the 24 companies have proposed negotiating deals with his office, known as the CGU. They are OAS, Galvão Engenharia, Engevix and SOG Óleo e Gás.

One foreign company involved in the bribery scandal, Dutch oil platform leasing firm SBM Offshore NV, said last week it had agreed on a framework for an accord with the CGU.

Like the Brazilian firms, SBM cannot bid for contracts with Petrobras while it is under investigation.

To reach a settlement with the CGU, the companies must admit wrongdoing, provide information to the ongoing investigations, repay the damage and establish programs for compliance with Brazil’s new anti-corruption law.

Solicitor General Adams told reporters the deals would not obstruct criminal investigations and would instead provide prosecutors with new information.

The government defends the deals as the best way to get the companies to return the proceeds of corruption to Petrobras or state coffers.

Adams said the government is waiting for Petrobras to report its delayed fourth quarter audited results to set a floor for the amount of restitution it will seek under the leniency deals.

Petrobras, which is scrambling to estimate how much corruption reduced the stated value of its assets, says it plans to release the results by the end of April. Unaudited results released by Petrobras in January pointed to a possible net writedown for corruption-related losses of 61.4 billion reais ($19.2 billion).

BRASILIA (Reuters) – A majority of Brazilians favor impeaching President Dilma Rousseff due to an economic slump and a snowballing corruption scandal at state-run oil company Petrobras, according to a poll released on Monday.

The survey by polling firm MDA showed that 59.7 percent of respondents favor Rousseff’s impeachment, and 68.9 percent believe she is responsible for the corruption involving a massive kickback scheme at Petroleo Brasileiro SA, as the oil giant is formally known.

Despite the calls for Rousseff’s ouster and recent street demonstrations against her government, opposition leaders have resisted pushing for impeachment and say it is unlikely.

Former President Fernando Henrique Cardoso, of the biggest opposition party, the PSDB, told Reuters that removing Rousseff so soon after she was re-elected would be destructive to Brazil’s 30-year-old democracy, especially since prosecutors have found no evidence she participated in the corruption scheme at Petrobras.

Rousseff’s popularity has fallen to a new low, with 64.8 percent of respondents rating her government negatively and only 10.8 percent seeing it positively, the poll said.

When MDA last surveyed Rousseff’s popularity in late September, before her narrow re-election in October, 41 percent of respondents rated her government as “great” or “good” and 23.5 percent as “bad” or “terrible.”

The new poll also showed that Rousseff’s personal approval rating had dropped to 18.9 percent from 55.6 percent in September, while 77.7 percent of respondents said they disapproved of her leadership versus 40.1 percent in the previous survey.

If Brazil were to hold presidential elections today, opposition leader Aecio Neves would win. In the poll, 55.7 percent of respondents said they would vote for Neves, of the PSDB party, who lost the October presidential vote in a close runoff. Just 16.6 percent said they would vote for Rousseff.

A vast majority of those polled, or 92.8 percent, expressed concern about Brazil’s economy, which has slowed to a halt on Rousseff’s watch and is expected to fall into recession this year.

Pessimism about an economic recovery extends to the prospects for rooting out corruption, with 65.7 percent of respondents saying they do not believe those who were responsible for the graft at Petrobras will be punished.

The MDA poll, commissioned by the national transport lobby group CNT, surveyed 2,002 people from March 16 to 19.

BRASILIA (Reuters) – Prosecutors who uncovered Brazil’s biggest corruption case called on Friday for tougher prison sentences and more legal powers to crack down on rampant graft that costs taxpayers more than the annual budget for education and health.

Hoping to ride a wave of national disgust over the latest corruption scandal at state-run oil company Petrobras, the top federal prosecutor’s office known as PGR sent Congress proposals to stiffen penalties for corruption to up to 25 years in prison.

The prosecutors are seeking legal reforms to speed up the arrest of corruption suspects and seizure of their assets before they can be hidden. They also proposed reducing Brazil’s long appeals process that often lets criminals go scot-free.

A multibillion-dollar kickback scheme uncovered at Petroleo Brasileiro SA has shaken President Dilma Rousseff’s government and threatens to further slow a stagnant economy.

The investigation dubbed “Operation Car Wash” has led to the indictment of scores of executives from Brazil’s top builders. It has implicated 47 politicians who allegedly received graft money, all but one of them from Rousseff’s governing coalition.

“The Car Wash case has angered Brazil but it has not reduced corruption or impunity in the country,” said the lead prosecutor in the probe, Deltan Dallagnol. He said the proposals could transform the anger into changes needed to fight corruption.

According to an estimate by the United Nations Development Program, graft amounts to 200 billion reais ($62 billion) a year in Brazil, or twice the 2014 health budget and 2-1/2 times the education budget.

The Petrobras scandal and economic downturn led to protests by about 1 million people across Brazilian cities on Sunday.

The PGR’s anti-corruption wish list came two days after Rousseff made her own steps to counter rising discontent over the Petrobras scandal that has undermined her popularity and put her Workers’ Party and its allies on the spot.

Both sets of measures call for the criminalization of off-the-books slush funds – known in Portuguese as “Caixa 2″ – that are widely used by political parties to finance campaigns.

But the PGR plan goes further, proposing that political parties be held responsible and penalized by exclusion from elections if their members are found guilty of corruption.

On Monday, Dallagnol and his team of prosecutors charged the treasurer of the ruling Workers’ Party with corruption for soliciting donations from executives accused of funneling money from Petrobras contracts to politicians.

BRASILIA (Reuters) – Brazilian President Dilma Rousseff launched an anti-corruption offensive on Wednesday to counter rising discontent over a kickback scandal engulfing state-run oil company Petrobras that has implicated her allies and undermined her popularity.

Her anti-corruption proposals, contained in bills submitted to Congress, include the criminalization of slush funds – known in Portuguese as “Caixa 2″ – that are widely used by Brazil’s political parties to finance their campaigns.

Other steps would hasten the seizure of assets from people convicted of corruption and from government officials who accumulate wealth out of proportion with their income.

As part of the anti-corruption drive, Rousseff also signed a decree implementing an anti-bribery law passed more than a year ago that stiffens fines for companies but has not been applied for a lack of finalized rules.

Rousseff said she would not brush the latest corruption scandal under the carpet and sought to divert criticism.

“I’m sure all Brazilians of good faith, even those who did not vote for me, know that corruption in Brazil was not invented recently,” she said in a speech.

Many Brazilians, however, hold her responsible. On Sunday, about 1 million people took to the streets of Brazil’s largest cities in anti-government protests triggered by the Petrobras scandal and discontent over economic stagnation.

Some demonstrators called for her impeachment.

Rousseff was chairwoman of Petrobras during the years when most of the corruption took place. She has denied knowing about a multibillion-dollar scheme in which kickbacks on overpriced contracts with some of Brazil’s top engineering and construction firms were paid to politicians and Petrobras executives.

Opinion polls show most Brazilians believe she knew.

Less than three months into her second term, Rousseff’s popularity has sunk to the lowest for a Brazilian leader since 1992, shortly before President Fernando Collor was impeached for corruption, according to a new poll published on Wednesday. {ID:nL2N0WK0E3]

The year-old investigation has so far led to the indictment of 103 people on racketeering, bribery and money laundering charges, including three former Petrobras senior managers and executives from six leading builders. Forty-seven politicians, mostly from Rousseff’s coalition, are under investigation too.

Opposition leaders have said impeachment is unlikely since Rousseff has not been personally accused of wrongdoing in the Petrobras scandal.

Still, the investigation came closer to the president on Monday when prosecutors charged the treasurer of her Workers’ Party with corruption for soliciting donations from executives accused of funneling money from the oil company.

Vaccari was “well aware” the donations he was seeking comprised funds stemming from bribes, Dallagnol said, adding that much of the evidence was gleaned from plea bargain deals with executives who were indicted and jailed late last year.

Such plea bargain deals have restored 500 million reais ($154 million) of stolen money to public coffers to date, he added.

The Workers’ Party says all the donations it received were legal and Rousseff has denied knowing about corruption at Petrobras though she was chairwoman of its board from 2003 to 2010 when much of the alleged graft occurred.

Still, the scandal’s fallout has heaped political pressure on Brazil’s president months after she was narrowly re-elected. Outrage among Brazilians contributed to huge street protests across the country, pressuring her administration and in several cases calling for her impeachment.

Duque, who headed the department responsible for the bulk of Petrobras investments, was also indicted after federal police arrested him at his house in Rio de Janeiro. He had been detained for three weeks late last year in the early stages of the Petrobras investigation known as Operation Car Wash.

The arrest warrant was issued after prosecutors discovered transfers of about 20 million euros ($21 million) between accounts he managed in Switzerland and Monaco, along with transfers to U.S. and Hong Kong banks. Prosecutors said the amounts were “not compatible” with his earnings at Petrobras, formally known as Petroleo Brasileiro SA.

Transfers occurred up until the second half of 2014, after the investigation had started, a revelation the judge overseeing the probe in the southern city of Curitiba called “scary.”

Duque’s was one of six arrests being carried out by Brazil’s federal police. They served a total of 18 search and detention warrants in Rio de Janeiro and Sao Paulo on charges that included bidding fraud.

Duque and Vaccari also face charges of money laundering and forming a cartel. Neither was immediately available for comment. Vaccari’s lawyer has previously denied wrongdoing.

The corruption probe, Brazil’s largest ever, had already led to 40 indictments on racketeering, bribery and money laundering charges.

Those previously indicted include two former Petrobras managers and 23 executives from six of Brazil’s leading engineering firms OAS [OAS.UL] [OAEP.UL], Camargo Correa [PMORRC.UL], UTC Engenharia, Galvao Engenharia [QGDI.UL], Mendes Junior (MEND5.SA: Quote, Profile, Research, Stock Buzz) and Engevix, including board members and vice presidents of the companies. Also under investigation by Brazilian authorities, though none of their executives have been indicted, are Odebrecht SA [ODBES.UL] and Andrade Gutierrez. The companies have publicly denied any wrongdoing.

Prosecutors have asked the Supreme Court to investigate 34 sitting politicians, including the speakers of both houses of Congress, for allegedly receiving bribe money.

BRASILIA (Reuters) – Brazil’s upcoming 2015/16 coffee harvest that starts in May will produce 40.3 million to 43.25 million 60-kg bags, according to the latest research by the local government industry-linked Procafe Foundation released on Thursday.

If confirmed, the forecast commissioned and published by the National Coffee Council (CNC) would be a drop of between 4.6 to 11.1 percent from the last year’s harvest of 45.34 million bags.

“The drought of 2014 hurt the 2015 harvest more than the 2014 harvest,” Procafe agronomist Jose Braz Matiello said. “2016 should see a small recovery. We could see a 4-to-5 million bag increase to 46-47 million.”

Arabica beans will make up the bulk of that output with 30 million to 32.15 million bags, almost in line with last year’s harvest of 32.31 million bags.

This year, Brazil’s conillon crop, a local variety of robusta bean, appears to have suffered the brunt of the dry weather in January. Procafe said conillon beans would account for 10.3 million to 11.1 million bags of the new crop, down as much as 21 percent from the 13 million bags harvested in 2014.

The report explained that dry conditions particularly in the Triangulo Mineiro region of Minas Gerais state has caused some coffee cherries to form without developing beans within their fruity encasing.

Despite the losses in the Triangulo area which could push output down 18 percent from last year there, the important Forested Zone of Minas Gerais is expected to show a 22 percent to 31 percent jump in output this year, Procafe said.

Concerns of two straight years of drought losses caused coffee prices to spike to two-year highs in January but reports on high sales volume recently have pushed them back down.

Analyst Safras & Mercado said in a report on Thursday that 79 percent of last year’s crop had been sold by the end of February, up 4 percentage points from February and in line with 77 percent of the previous crop sold a year earlier.

Procafe’s forecast, which looked at 2,700 farms across the coffee belt, is on the lower end of estimates of the new crop.

By comparison, Brazil’s crop supply agency Conab, which itself tends to be on the lower end of the range of estimates, forecast in January that the new coffee crop would yield between 44.1 million and 46.6 million bags.

BRASILIA (Reuters) – President Dilma Rousseff can no longer count on a key ally in her ruling coalition, complicating efforts to stave off what could be the roughest patch for Brazil’s economy in a quarter-century.

Leaders of the Brazilian Democratic Movement Party (PMDB), the biggest party in Rousseff’s coalition, blame her for their inclusion in a probe of politicians allegedly involved in a massive corruption scheme at state-run oil company Petrobras.

PMDB legislators told Reuters they expect the dispute to get even messier in coming weeks, making them less likely to support Rousseff’s efforts to cut Brazil’s budget deficit and restore investor confidence in the struggling economy.

“Their passage will be tough. They are very controversial measures that affect the rights of workers,” Leonardo Picciani, the PMDB leader in the Chamber of Deputies, said of two initiatives that would save the government about 18 billion reais ($5.74 billion) a year by tightening access to pension and unemployment benefits.

“The government will have to convince us they are really needed,” Picciani told Reuters.

While few expect the PMDB to formally break with Rousseff’s leftist Workers’ Party in coming months, such open resistance to her legislative proposals adds to her long list of political and economic problems.

The economy is expected to shrink at least 0.6 percent this year, inflation is running well above 7 percent, a widespread drought has raised the possibility of water and power rationing, and public anger is rising over the corruption scandal at Petroleo Brasileiro SA, as Petrobras is formally known.

The PMDB, which has its roots in Brazil’s return to democracy in the 1980s but no clear ideology, holds more seats in Congress than any other party, including a quarter of the Senate.

Rousseff’s vice president, Michel Temer, is also from the PMDB.

The party’s reputation for allying itself with whomever is in government, in order to reap power and other spoils, runs so deep that a satirical magazine joked during last year’s tight presidential election runoff that the PMDB would endorse both Rousseff and her centrist opponent.

The cause for the party’s anger with Rousseff is disputed.

Officials in Rousseff’s government have denied any role in pressuring a prosecutor to include PMDB leaders on a list of 47 politicians under investigation in the Petrobras scandal.

Nevertheless, since the list was released last week, PMDB leaders have vented their anger at Rousseff and effectively shelved an increase in payroll taxes that was a pillar of her austerity plans.

The politicians being investigated may face charges and a trial in months and years to come, making more conflict likely.

“I don’t see an end to this crisis. It is not just any crisis. The Petrobras case has become the biggest scandal in Brazilian history,” PMDB Senator Ricardo Ferraço told Reuters.

ROUSSEFF TRIES TO FIX DAMAGE

Brazil’s currency has fallen 9 percent this month and 15 percent since the start of the year as investors fear the government could be forced to abandon austerity and Brazil might lose its coveted investment grade credit rating.

Rousseff, a career bureaucrat who has struggled in the art of coalition building since taking office in 2011, is scrambling to defuse the crisis, or at least prevent it from further damaging the economy.

First, she met with Temer on Monday, prompting a wave of conciliatory comments from party leaders.

On Tuesday, she sent her finance minister Joaquim Levy to negotiate with the PMDB speakers of both chambers of Congress. Levy compromised and reached a deal on income tax bracket changes, although it was less than the government had sought and leaders on both sides say the wounds are far from healed.

The next battle will be over the two presidential decrees that need Congressional approval to set stricter rules for accessing unemployment and pension benefits.

PMDB lawmakers also say they will call the Workers’ Party’s treasurer in to testify in a congressional investigation of the Petrobras scandal to examine whether any of the bribe money was used to fund Rousseff’s election campaign.

The dispute runs beyond the Petrobras case.

PMDB leaders complain the Workers’ Party poured its resources into helping just its own candidates in the 2014 elections. And when Rousseff was elected with its help, the PMDB was miffed it did not get meatier positions in her cabinet.

Worse, now that there is an economic crisis, they complain Rousseff is coming to the PMDB to help pass unpopular belt-tightening measures that even her own party does not support.

“When things were going well, the Workers’ Party was first in line,” said PMDB congressman Danilo Forte. “Now that it’s time to pay the bills, the Workers’ Party hides and wants us to take the heat.”

Few PMDB members believe the alliance will still be in place by the next election in 2018. At last year’s PMDB convention, 40 percent of delegates wanted to end the alliance with the Worker’s Party, and the number is rising.

BRASILIA (Reuters) – President Dilma Rousseff appealed to Brazilians on Sunday to back fiscal austerity policies, while saying that the belt-tightening will last as long as needed and positive results will only start showing at the end of this year.

With the economy stalled and relations with her coalition allies in disarray due to a massive corruption investigation at state-run oil company Petrobras, Rousseff needs support for unpopular steps to reduce a gaping deficit and save Brazil’s investment grade rating on its debt from a downgrade by ratings agencies.

“This is a process that will last as long as necessary to rebalance our economy,” Rousseff said in a nationally televised speech marking International Women’s Day. She said she expected the economy to start recovering at the end of this year.

The leftist leader said the belt-tightening started with cutbacks in government spending and has moved on to reducing tax breaks and subsidies for credit.

Rousseff’s plans to cut unemployment and social security benefits, however, have met with resistance from within her own Workers’ Party. And a decree to raise payroll taxes paid by businesses was thrown out by her main ally in the Senate last week.

That almost unprecedented congressional maneuver was a sign of how fallout from the multibillion-dollar kickback scandal at Petroleo Brasileiro SA, as Petrobras is formally known, threatens Rousseff’s agenda.

Rousseff told Brazilians that temporary sacrifices would be needed to restore the government’s overdrawn accounts, saying, “We are doing some corrections and adjustments to the economy.”

She blamed a prolonged international economic slowdown and a severe drought for Brazil’s current woes. There was no admission of mistakes in the economic policies of her first term that undermined investor confidence and helped push the world’s seventh economy toward recession.

In an attempt to spur investment, Rousseff said her government plans to grant new concessions to build roads, railways, ports and airports this year and enter into new partnerships with the private sector.

Brazil’s Supreme Court announced on Friday it will investigate the speakers of both houses of Congress and 32 other sitting politicians, all but one from Rousseff’s governing coalition, for allegedly receiving money from overpriced construction contracts signed by Petrobras.

Rousseff made only one reference to the Petrobras scandal shaking Brazil’s political establishment. She said the “regrettable episode” was the target of a “wide-ranging, independent and rigorous” investigation.

BRASILIA, March 6 (Reuters) – Brazil’s Supreme Court will
investigate the speakers of both houses of Congress and 32 other
sitting politicians in connection with a multibillion-dollar
kickback scheme at state-controlled oil company Petrobras
.

The scandal has shaken the political establishment and
undermined support for President Dilma Rousseff, who was
narrowly re-elected last year and is struggling to stave off an
economic recession and a downgrade by credit rating agencies.

A court official said on Friday that 12 senators and 22
congressmen from five parties are under investigation, all but
one from Rousseff’s governing coalition. The most prominent are
the president of the Senate, Renan Calheiros, and the Speaker of
the Chamber of Deputies, Eduardo Cunha, both of the PMDB,
Brazil’s largest party and Rousseff’s main coalition ally.

The Progressive Party has 21 members under investigation,
the PMDB six and the Workers’ Party five, including Senator
Gleisi Hoffmann, Rousseff’s chief of staff during her first
term. The party’s treasurer João Vaccari will be investigated.

Only one opposition politician, Senator Antonio Anastasia,
of the PSDB party, was on the list, which includes Senator
Fernando Collor de Mello, a former president who resigned in
1992 to avoid impeachment for corruption.

Under Brazilian law, elected politicians can only be tried
by the highest court, which must now decide with the help of
prosecutors whether there is enough proof to put them on trial.

The investigation could take years. Brazil’s largest
political corruption case until now, involving monthly payments
to lawmakers in return for support in Congress for Rousseff’s
Workers’ Party, took seven years to get to trial in 2012.

FISCAL PLAN IN TROUBLE

The immediate casualty of the political crisis could be
Finance Minister Joaquim Levy’s belt-tightening plan to bridge
Brazil’s gaping fiscal deficit and avert a rating downgrade.

In a surprise setback on Tuesday, Senate President Calheiros
threw out an austerity measure decreed by the president for what
he called procedural reasons, though it appeared to be
retaliation for not clearing his name from the corruption probe.

“The political situation is going to get even worse for the
president,” a senator in the ruling Workers’ Party told Reuters,
on the condition that he not be named.

“There is a widespread feeling among the political class,
especially in the PMDB, that the government manipulated the list
of the lawmakers involved in the investigation to lessen the
damage for the Workers’ Party,” the senator said. He said
lawmakers were planning to block other austerity measures.

Rousseff faces more trouble in Congress from a parliamentary
inquiry commission set up to look into the corruption scandal.
Its first witness called to testify will be former Petrobras
manager, Pedro Barusco, who has said in a plea bargain statement
made public that the Workers’ Party received up to $200 million
from bribes paid on Petrobras contracts.

The scandal threatens Brazil’s already weak economy by
prompting Petrobras to halt or cancel key investment projects.
Companies in the energy and construction sectors are finding it
harder to obtain credit.

The corruption probe has so far led to 40 indictments on
racketeering, bribery and money laundering charges, including
two former Petrobras senior managers and 23 executives from six
of Brazil’s leading construction and engineering firms.

Rousseff was chairwoman of Petrobras’ board of directors
from 2003 to 2010, when much of the alleged corruption took
place. She has denied knowing about the scheme during those
years and has vowed to respect the judiciary’s independence.

Brazil’s real currency tumbled 7 percent in the week
to 3.05 per dollar on Friday, it lowest close since 2004, and
stocks retreated more than 3 percent, on investor
worries that the political storm will hinder a fiscal adjustment
and cause Brazil to lose its investment-grade credit rating.